PSX to break the 200,000 barrier by December 2026

Pakistan’s stock market is expected to extend its record rally into next year, with Taurus Securities analysts predicting that the KSE-100 index may cross 200,000 by December 2026, supported by strong corporate earnings, improved investor confidence and continued policy stabilization under the IMF program.

The bullish forecast is based on the index’s performance in 2025 as the market absorbs domestic political instability, falling global commodity prices and active reforms in the energy and fiscal sectors. “We expect the KSE-100 to reach 206,000 by the end of December 26, translating into a 24% return from current levels,” Taurus Securities noted in a report.

According to the brokerage, the valuation of the KSE-100 remains attractive even after a gain of nearly 45% during 11MCY25 due to strong gains in banking, energy, cement and technology stocks. It expects FY26 earnings growth to remain strong, with companies benefiting from improved pricing power, lower finance costs over time and operational efficiencies driven by structural reforms. Assuming macroeconomic continuity and predictable policy dynamics, the index has the capacity to rise another 20-25% next year, Taurus noted, adding that liquidity from local investors remains a critical pillar of the ongoing rally.

While the broader trend remains positive, the KSE-100 has shown signs of near-term consolidation. The index hovered around the 166,000 level in late November as investors digested geopolitical risks and awaited clarity on upcoming monetary and fiscal decisions. Taurus attributes the slowdown largely to uncertainty created by the closure of the Pakistan-Afghanistan border, which has disrupted trade flows and weakened sentiment in stocks with Afghan exposure.

However, domestic participation remains strong. The brokerage noted that while foreign investors continued to trim their positions in November, local individuals, banks and mutual funds absorbed the selling, keeping the market steady near record highs. This trend highlights the “deepening of domestic equity culture” and the market’s resilience to external shocks. The cement sector remained in the spotlight throughout November, particularly after Maple Leaf Cement ( MLCF ) announced its intention to acquire 58% of Pioneer Cement ( PIOC ). The news sparked aggressive buying, pushing PIOC up 64% month-on-month, with MLCF advancing 10% MoM. Fertilizers also gained momentum, with Fauji Fertilizer Company (FFC) gaining 20% ​​following its inclusion in the KMI-30 index, sparking Islamic portfolio inflows.

In contrast, Pakistan Aluminum Beverage Cans (PABC) emerged as the biggest worst performer, falling 15% due to its heavy reliance on the Afghanistan market at a time when official trade remains suspended.

A major theme highlighted by both Taurus and JS Research is the continued weakness in oil prices. WTI crude oil traded below $60 a barrel in November, its lowest level in years, on record U.S. stockpiles, sluggish global trade and reports that Saudi Arabia may push Asian oil prices to five-year lows. Analysts say this provides substantial relief to Pakistan’s import bills, stabilizing the rupee and reducing inflationary pressure.

The trade freeze with Afghanistan, effective October 11, is causing growing concern. Taurus estimates that if the border remains closed for three months, Pakistan could lose around $150 million in exports in the second quarter of FY26. Cement exporters and companies heavily dependent on the Afghan market, including PABC, remain most vulnerable. However, the shutdown has also created unexpected beneficiaries. With illicit inflows from Afghanistan having fallen sharply, industries previously affected by smuggling, including tires, petroleum products, steel, electronics and personal care, are witnessing a shift in demand to formal sector products.

JS Research, in its market overview, reiterated the strong medium-term outlook, but warned that the market may continue to consolidate in the near term as geopolitical and macroeconomic uncertainties persist. The brokerage noted that despite a current account deficit of $112 million in October, Pakistan’s overall balance of payments remains in surplus due to stable inflows and low import prices.

With inflation above 6% in November, JS sees no room for a rate cut at the next meeting on December 15. Both brokerages identify the December 8 IMF Executive Board meeting, which will review Pakistan’s second EFF tranche and first RSF facility, as a near-term trigger for market direction. A successful overhaul could unlock $1.2 billion.